On Saturday the Herald proclaimed that the cost of the City Rail Link had blown out by $500 million which came on the heels of Prime Minister John Key saying that the project will “almost certainly cost more than they thought”
The cost of Auckland’s most expensive project – the $2.5 billion City Rail Link (CRL) – has jumped to more than $3b.
Auckland Transport chief executive David Warburton says the project needs more money in the rail network that could easily take the “combined project cost” above $3b.
He understood that Prime Minister John Key was referring to additional investment in the rail network when he claimed last month the CRL will “almost certainly cost more than they thought”.
The article also quotes some unnamed sources, presumably from the government, claims extra work is needed for the CRL
A second source said that a “bit more rigour and discipline” since the Government had agreed to bring forward a business plan had identified work that should have been costed in the first place.
Of course it didn’t take long for the three councillors who have consistently opposed improvements to the city to jump on board and claim they predicted doom and gloom all along.
Confirmation by Auckland Transport that the cost of the City Rail Link will undoubtedly rise to over $3 billion does not surprise three Auckland councillors who recently wrote to the Auditor-General outlining their concerns about the project and urging the Office of the Auditor-General to ensure a close oversight. The trio now wonder what the ‘no go’ point is with the CRL.
It equally didn’t take long for Auckland Transport to (unusually) get in touch and tell me that the article was wrong and that they’d be making a formal complaint about it. They later provided me with the information David Warburton sent Orsman who seems to have confused and conflated a couple of issues.
Firstly, AT say the estimated price of the project remains $2.5 billion but the crucial aspect is that they say it has always been the centre of a range that could be +/- 20% – in other words they say it will cost between $2 billion and $3 billion depending on how tendering goes. It seems that Orsman and the herald have only taken the upper limit of this range to fit their narrative. They also say that “recent tenders for large civil works contracts in NZ have come in at 10% to 15% under the initial QS estimate“. They won’t actually give any examples of these projects though, saying their “pricing analysis is to assist in competitive indexing“. They also claim that the only people to benefit from claiming the prices have gone up are the those tendering for the work “creating an environment of high price expectation“. The CRL business case estimated the impact of the cost increasing by 20% and shows that even if that happens, the BCR drops from around 1.6 to 1.3, conversely if costs dropped by 20% the BCR rises to 1.9. This is shown below with the figures in 2015 $.
Secondly, the CRL will unlock a lot of potential capacity across the entire rail network, that is after all the purpose of it. That doesn’t mean it’s the only thing that’s needed and it was already known that over time other improvements are needed. This includes things such as signalling upgrades, removal of level crossings, additional cross overs, the third main south of Westfield and many other improvements. Many of these were detailed in this presentation Kiwirail gave to the council’s infrastructure committee last year. Not all of these other improvements are likely to be needed on day one of the CRL and many will be things that can progressively be done over the years following the completion of the CRL to increase capacity of the rail network to its full potential. It seems that deciding which of these projects should or shouldn’t as part of the costs of the CRL is still being decided. On this, Warburton said
My understanding is the PM was referring CRL as part of the wider rail investment and there will be additional investment in the network to optimize the CRL work. One can easily discuss this as a combined project cost over the life of the project being above $3b. It simply depends on scope, pricing and how projects are related to CRL. That’s not equivalent to what I understood you/your informant were implying.
Of course splitting up projects into smaller chunks, some of which are completed later is nothing new and it happens all the time in other areas. One such example is the Waterview Connection and the Western Ring Route. The Waterview Connection project only covers the extension of SH20 from Maioro Rd, the tunnels and the Waterview interchange and is costed at $1.4 billion. Not included in that is the cost widening (and raising) of the SH16 causeway to handle the traffic or any of the other projects along SH16 to cope with the expected traffic demand. Those projects bring the total to over $2.4 billion and if you include the other projects from recent years needed to complete the Western Ring Route, that raises the cost to $4 billion. The image below is something I put together a few years ago so some figures will be out of date.
So it seems this news by the Herald is the result of a number of factors but the actual situation hasn’t actually changed. The cost remains $2.5 billion as it has been for some time and as there were before, there are a number of other rail upgrades that will be needed over time.
But I also think that AT really haven’t helped themselves in how they’ve handled this issue. Given just the political posturing they should have known this would have come up but especially so since the Prime Ministers comments. Instead they seem to have deemed it all a non-story and so have let it run with not much done to challenge it. The responses to the Herald suggest a lack of cohesive and clear messaging which only adds to the confusion. It is also very difficult to find much, if any useful information about the project on the on the AT website, most of what is there is useless fluff or out of date. AT would help themselves if they were more open about the project and if the website was more useful.